Obama: Style or Substance?
There is no doubt Senator Obama has style. He is definitely the best orator in the 2008 presidential campaign, and he may even place up among the greats like JFK, RFK, and MLK. That being said, some of his critics, especially in the Republican camp, like to claim that Obama has no substance. To examine this claim, I propose looking at the single biggest issue in this election: the economy.
Senator Obama gave a speech yesterday in New York on this major issue. He addressed the housing crisis as well as broader economic problems that we are having. Contrary to what some may say, though, he did not just speak in platitudes and catch phrases. Read the full transcript here and you will see that Obama’s speech was full of specific and realistic proposals. For the immediate housing crisis, Obama has sponsored legislation to create “a new FHA housing security program, which will provide meaningful incentives for lenders to buy or refinance existing mortgages.” He has also “proposed a $10 billion foreclosure prevention fund that would help them sell a home that is beyond their means or modify their loan to avoid foreclosure or bankruptcy.” And to prevent this from happening again, he also “proposed tough new penalties on fraudulent lenders and a home-score system that will allow consumers to find out more about mortgage offers and whether or not they’ll be able to make payments.” And the last specific item he mentioned related to the housing crisis was a “10 percent mortgage interest tax credit that will allow homeowners who don’t itemize their taxes to access incentives for home ownership.”
Obama then went on to lay out six broad economic reforms that this country needs. Although he goes into more detail in this speech and other proposals, I will briefly summarize them here:
1. Give the Federal Reserve basic supervision authority over institutions to whom it may be a “lender of last resort.”
2. Generally reform regulations for financial institutions (increase regulation on complex financial institutions, investigate ratings agencies, increase transparency, require full disclosure to shareholders)
3. Streamline regulatory agencies to match how the financial sector has shifted over the past decades.
4. Regulate institutions based on their activities, not their identities.
5. Investigate cases of fraud and market manipulation more strictly.
6. Create a financial market oversight commission to advise the government on potential risks before they can damage the economy.
Obviously this post cannot contain anything close to the full measure of specific proposals that Senator Obama has had, even on just this one issue. But this should give a clear impression to the voters that Obama knows what he is talking about and he has clear, specific, and realistic solutions to help our economy. All of this contrasts very deeply with Senator McCain.
McCain is famous in this campaign for making several remarks to the effect that he “doesn’t really know very much about the economy,” and he “should probably learn more about it.” Perhaps he isn’t learning fast enough, though. This past week, McCain also gave a speech on the economy, but he had no specific proposals or ideas. He has no plan to do anything about the economic troubles facing our nation. Instead, his speech was primarily a scolding for lending institutions and the American people who have fallen victim to the mortgage crisis. In the style of Herbert Hoover, McCain rejected government intervention, hoping instead that the market will sort everything out by itself. Somehow, I just don’t think that message is going to resonate with people when they consider the candidates’ positions on this most significant issue. Kudos to Obama for the specific proposals and shame on McCain for giving us nothing. Maybe McCain just needs to learn more about the economy before he will figure out what to do about it.
it’s good to know people actually pay attention to what a candidate says and is willing to do instead of just voting the same way as always because “that’s what we do”. i think it is ridiculous that mccain admits that he doesn’t know much about the economy when we’re on the brink of recession, perhaps we already are in one…
wonderful
mccain is dumb. no matter how much he uses the rhetoric he is not laissez-faire.
obama doesn’t address the heart of the issue. it is very disheartening to hear.
and of course, why would he? serving special interest is the heart of the american monetary system.
oh, but he wants more oversight (control) in the market (for the common good)
great. the exact opposite of what should be done.
american doesn’t have a free market and hasn’t had one in decades.
can anyone say fiat money? over taxed and over regulated?
yet we consistently hear that capitalism and greedy capitalists are at the root of the problem. and it’s obvious that this would be so.
why would the government and it’s corporate cronies ever want to incriminate themselves? we know how it works, no? just throw more money and control at the government and they will fix the problem. sure…..
True Money Supply (TMS)
http://www.mises.org/content/nofed/chart.aspx?series=TMS
obama will not cut spending. he is in favor of more regulation.
does everyone forget that that the great depression was caused by the federal reserve and took so long to recover because of bad government policies?
where is the money going to come from that obama speaks of?
Robert Higgs says: “It’s like taking a bucket of water from the deep end of a pool and dumping it into the shallow end, and expecting the water level to rise”
remember what mussolini said about fascism? it should be called corporatism.
Consitution for the New Deal (1937, Mencken)
Bill of Rights
There shall be complete freedom of speech and of the press – subject to such regulations as the President or his agents may from time to time promulgate.
The freedom of communication by radio shall not be abridged; but the President and such persons as he may designate shall have the first call on the time of all stations.
In disputes between capital and labor, all the arbitrators shall be representatives of labor.
Every person whose annual income fans below a minimum to be fixed by the President shall receive from the public funds an amount sufficient to bring it up to that minimum.
No labor union shall be incorporated and no officer or member thereof shall be accountable for loss of life or damage to person or property during a strike.
All powers not delegated herein to the President are reserved to him, to be used at his discretion.
“oh, but he wants more oversight (control) in the market (for the common good)
great. the exact opposite of what should be done.”
We should give it up to the “hidden hand?”
Fiat money!? The U.S. dollar is simply valued because the government demands it in the form of taxes? What’s your connection? Simply screaming fiat money is an empty claim. All U.S. money is technically “fiat money,” because its not backed by any standard; it’s just paper.
“just throw more money and control at the government and they will fix the problem.”
The alternative is give more leeway and autonomy to big corporations? For a recent example of this, see Bear Sterns. Are High risk investments, hedge funds, and sub prime loans are great exercises of corporate responsibility?
Jesse, that’s a lot of empty rhetoric you’ve spewed there. And the appeal to fear — the fascists claim? Really . . . Really?
That is an interesting theory to propose that it was over-regulation that caused the housing crisis, not under-regulation like almost all economists and analysts say. I wonder if you have any examples of this happening?
The crisis is obviously too big to boil down into simple sentences, but it is my understanding that it was primarily a result of investors and lenders who overextended themselves (because they could, there was no regulation or oversight) by buying up extremely risky subprime mortgages. When these mortgages starting collapsing and the whole housing market started declining, we did nothing and our government continues to do nothing (no intervention, no regulation). But many people, including myself, think that there are things we can do to soften the blow of this recession and make the economy stronger. We don’t have to just stand at the street and watch our house burn if there is a hydrant and a hose just sitting at our feet.
Using an example of an institution’s mistake in the 1920s is a silly way of saying that the entire economic philosophy that undergirds that institution is inherently and eternally flawed.
I just read a humorous article in the Exemplar that makes the exact claim that I introduced: “While Senator Obama may be a wonderful orator he has been significantly lacking in substance.” Of course, the article wasn’t attempting to be humorous, but the longer the campaign season lasts and the more substance comes out, the more absurd this claim becomes. Just because you keep saying something over and over doesn’t make it true, guys.
The more thoughtful critique of Obama’s general lack of substance comes not from the claim that he does not have substantive policy proposals (though he is decidedly less wonkish than his primary opponent), but that his meta narrative of hope/change allows people who favor vastly different policy outcomes to believe that he agrees with all of them. Admittedly, this is not much of a reason to oppose him. It is, however, something that will make it difficult for him to maintain a high approval rating should he become president.
The more damning critique of his message remains that his central promise to change the way business is done in Washington is beyond ridiculous. That and the fact that I have terrible doubts about his electability at this point.
The fact that Obama “allows people who favor vastly different policy outcomes to believe that he agrees with all of them” is utterly non-unique in election history. The issues have always taken a backseat to rhetoric and image. But image and rhetoric aren’t just important during the campaign, they affect the president’s ability to lead effectively. They also heavily influence how the president is viewed in history. So maybe we shouldn’t discout pure rhetoric, even when we see it.
Honestly, most reasonable people realize that Obama and Clinton are almost identical on policy. Either one will bring the policy “change” that we need when it comes to important issues like economic regulation, Iraq, and health care. There is no question about that. As for “changing the way business is done in Washington,” I think we are all skeptical of that also, but it does make for a better campaign mantra than “I’m am a fighter,” and “I am experienced with working with Washington the way it is now.”
I used to think that it was a bad thing that the economy was overtaking Iraq and health care as the top issue because I thought the other two were sure wins for the Democratic nominee, but now I am glad to have the economy as a big issue also. McCain has totally dropped the ball on the issue and it will be very difficult for him to pick it back up again.
“its not backed by any standard; it’s just paper.”
exactly. this is a problem.
where do you think the current bubble came from?
“an example of an institution’s mistake in the 1920s is a silly way of saying that the entire economic philosophy that undergirds that institution is inherently and eternally flawed”
the problem is the fed’s easy money policies. inflation ensues (expansion of the money supply). it is done at taxpayer expense. it can only be balanced through wealth redistribution policies. it a form of central economic planning. to claim that it is the result of business is only half the story. the boom is artificial and created because of the fed’s bubble, which inevitably will burst.
so it’s hegelian. they create “wealth” out of thin air, problems and crisis result in the long run, the very same agency that encouraged this behavior steps in to “correct” it. so the problems we are facing now are not necessarily the result of the invisible hand, i.e., the free market, but rather the invisible hand of the fed and bad montary policy. it is the result of the central banking cartel the us government has given authority to.
what bernanke believes in is more aggressive lending practices. that’s why he is lowering the fed funds rate. the depression came about because of all the monetary inflation of the 20′s and then the contraction that followed.
bernankes plan is not to contract.
Abolish the Fed
http://www.lewrockwell.com/paul/paul53.html
“where do you think the current bubble came from?”
The bubble did not come from our currency not being backed by gold anymore. The bubble came from over-investment in risky, under-regulated financial sectors. We had bigger bubbles burst when we were on the gold standard than we have had since. We also had inflation when we were on the gold standard.
“inflation ensues.”
Inflation tends to happen anyway, and it isn’t always a bad thing when it is kept to a reasonable amount. I am pretty sure that just about every nation on the planet experiences inflation, but you can prove me wrong if you want to. It certainly isn’t purely the result of our Federal Reserve system.
Abolishing the Federal Reserve would be a disastrous idea. Perhaps they have made decisions that we second-guess looking back on them. But overall, this system has brought an incredible amount of prosperity and stability to our economy for decades.
Even Milton Friedman doesn’t believe that the Fed caused the Great Depression. He blames the Fed for making it worse than it had to be, probably even more than is reasonable, but he doesn’t assert that the Fed caused it.
The Economics of Housing Bubbles
http://www.mises.org/journals/scholar/Thornton13.pdf
“There are three basic views of bubbles that are held by economists. The dominant view among modern mainstream economists, including the Chicago school and proponents of Supply-Side economics, is to deny the existence of bubbles and to declare that what is thought to be “bubbles” is really the result of “real” factors. The second view, which is espoused by Keynesians and by proponents of Behavioral Finance, is that bubbles exist because of psychological factors such as those captured by the phrase “irrational exuberance.” The third view is that of the Austrian school, which sees bubbles as consisting of real and psychological changes that are caused by the Fed. This view has the advantages of being able to identify the economic cause of bubbles and directs us to policy choices that would prevent future bubbles. ”
You heard it Here First
http://www.lewrockwell.com/thornton/thornton38.html
“LRC and Mises.org readers were alerted to the housing bubble long before anyone else. Frank Shostak alerted readers in March 2003, Christopher Mayer alerted readers in August 2003, and I reiterated these warning in February and June of 2004.”
There’s a reason why most people haven’t heard of the Austrian School of economics; it isn’t scientific, nor is it accepted.
Read just one criticism of it here. It is promoted by libertarian ideologues, not by legitimate economists who use what we like to call “math” and “models” and “testable hypotheses.” That is a problem, because it is very hard for subscribers to the Austrian School to engage Chicagoans or Keynesians in a real debate about economic issues.
Qualitative analysis may be interesting, but the field of economics is ultimately dominated by quantitative data that can be observed, tested, and concluded upon. Otherwise, any abstract theory is just as good as another.
But Jesse, more to the point of this post (since we can’t turn every post into a debate on the merits of libertarianism), are you seriously advocating the McCain/Hoover approach to the economy as opposed to the Obama approach?
Even if you and some others think that, the American people will overwhelmingly turn to the candidate who offers solutions for the future not just lectures about the past.
lol
that’s a very standard criticism.
makes sense that it is written by a physics student.
his science very much deals with a quantifiable (empirical) science.
austrians are different in the sense that they talk about methodological dualism
economics is a social science. (check out praxeology)
Mises wrote:
“Whatever the true nature of the universe and of reality may be, man can learn about it only what the logical structure of his mind makes comprehensible to him.
The logical structure of his mind enjoins upon man determinism and the category of causality. As man sees it, whatever happens in the universe is the necessary evolution of forces, powers, and qualities which were already present in the initial stage of the X out of which all things stem. All things in the universe are interconnected, and all changes are the effects of powers inherent in things. No change occurs that would not be the necessary consequence of the preceding state. All facts are dependent upon and conditioned by their causes. No deviation from the necessary course of affairs is possible. Eternal law regulates everything. In this sense determinism is the epistemological basis of the human search for knowledge. Man cannot even conceive the image of an undetermined universe. In such a world there could not be any awareness of material things and their changes. It would appear a senseless chaos. Nothing could be identified and distinguished from anything else. Nothing could be expected and predicted. In the midst of such an environment man would be as helpless as if spoken to in an unknown language. No action could be designed, still less put into execution. Man is what he is because he lives in a world of regularity and has the mental power to conceive the relation of cause and effect.[7]”
This point of view implies that human action could be explained, at least in theory, in terms of underlying material forces. We know that human action is immediately determined by the ideas and value judgments of the acting individuals. But these ideas and value judgments must in turn be determined by more fundamental causes. If such causes were physical or chemical processes, then the explanation of human behavior could become a branch of applied physics or applied chemistry.
http://www.mises.org/story/2876
Rothbard wrote:
“In our proper condemnation of scientism in the study of man, we should not make the mistake of dismissing science as well. For if we do so, we credit scientism too highly and accept at face value its claim to be the one and only scientific method. If scientism is, as we believe it to be, an improper method, then it cannot be truly scientific. Science, after all, means scientia, correct knowledge; it is older and wiser than the positivist-pragmatist attempt to monopolize the term.
Scientism is the profoundly unscientific attempt to transfer uncritically the methodology of the physical sciences to the study of human action. Both fields of inquiry must, it is true, be studied by the use of reason—the mind’s identification of reality. But then it becomes crucially important, in reason, not to neglect the critical attribute of human action: that, alone in nature, human beings possess a rational consciousness. Stones, molecules, planets cannot choose their courses; their behavior is strictly and mechanically determined for them. Only human beings possess free will and consciousness: for they are conscious, and they can, and indeed must, choose their course of action.[1]To ignore this primordial fact about the nature of man—to ignore his volition, his free will—is to misconstrue the facts of reality and therefore to be profoundly and radically unscientific.
http://www.mises.org/rothbard/mantle.asp
no. as i said, mccain doesn’t know what hes talking about. and hoover was no free marketeer. lol. he “blazed the trail”, as they say, for the New Deal.
Wasn’t he an “Engineer in Politics”?
It would be much more interesting if you responded to our arguments and ideas instead of just block-quoting what others have said (especially since it seems to be the same two or three people over and over).
But really, the question at hand in this post is what to do now. Are you really more in favor of McCain’s do-nothing and watch the recession approach instead of Obama’s set of positivistic solutions?
The abolishment of the IRS and the Federal Reserve is a political non-starter, isn’t it? Isn’t America always going to be somewhere between Free-market and centrally-planned, between “real” factors and “irrational exuberance.” The capitalist market is very speculative, from an investment vantage. Isn’t it this speculation that lead to the mortgage crisis and the sub prime collapse?
How does abolishing the Fed and the IRS help this situation? Is it because it destroys “illusory” fiat money? Wouldn’t that just dissolved the American economy and bring about the complete fall of American economic might? We’re talking complete stock market crash. Allowing Bear Stearns, regardless of their bad economic policies, to go bankrupt would have been disastrous for investors and would have destroyed stock market confidence (what little there is).
Do you advocate a gold or silver standard? Are you advocating neo-liberal, unabridged market freedom? I’m serious, because I’m not quite sure what it is you think should happen.
Gah!
Translate the Austrian School of Economic Thought into real Economic Policy.
What I mean Jesse is that this is all very philosophic and interesting; however, what policy changes would need to be made, set aside from abolishing the Federal Reserve and the IRS?
not doing anything obviously is wrong. it’s about our government doing less. allowing people to keep more of their money would be a nice start. stop inflating the money supply at the rate they are doing.
you can’t avoid recession. the market will always attempt to liquidate bad investment and provide balance. by allowing more money and credit to flood the market only makes the inevitable collapse bigger.
stop corporate welfare. that’s what these bailouts are.
the fed has a monopoly on money and anyone holding dollars is going to feel the effect of these bailouts because what they are doing is monetizing debt. it is a tax. but is much harder to measure because it infiltrates the whole economy.
what bernanke is doing is lowering the fed funds rate. this is encouraging more credit and money creation. that’s why ron paul always askes the question at the debates and bernanke at congressional hearings “how can you solve the problem of inflation with more inflation?”
here, watch this: seriously.
the whole point of this is to show how the central bank encourages easy money and credit.
president woodrow wilson signed the federal reserve act
interestingly he said:
“I am a most unhappy man. I have unwittingly ruined my country.
A great industrial nation is controlled by its system of credit.
Our system of credit is concentrated. The growth of the nation,
therefore, and all our activities are in the hands of a few men.
We have come to be one of the worst ruled, one of the most completely
controlled and dominated governments in the civilized world.
No longer a government by free opinion, no longer a government by
conviction and the vote of the majority, but a government by
the opinion and duress of a small group of dominant men.”
A 42-minute movie that looks like it was made in the 1970s? I don’t think I will have that amount of free time in the forseeable future. Sorry.
Believe me, I am not in favor of policies that uniquely benefit corporations and investment firms; however the present situation is different. Cases like the Bear Stearns Fed-assisted buyout are opprotunities when the government can help facilitate a recovery instead of a disaster. Major investment catastrophes like that affect more than just the corporations that are being “bailed out,” they affect everyone who invests in the stock market, and in turn, everyone who is involved in the U.S. economy. For instance, I am just a poor college student and a tiny invester in the stock market, but I have lost thousands of dollars since the overall stock market started going down as a result of the housing crisis. I want my government to do anything it can to help that situation for my good and for the good of the entire country.
The American credit flux is indeed an inherent flaw in America economics. Our system of credit is frail and highly elastic to the ebb and flow of the economy, especially the Stock Market.
“by allowing more money and credit to flood the market only makes the inevitable collapse bigger.”
Perhaps, but isn’t tighter restriction on loans and mortgages a viable solution?
America isn’t going to overthrow the welfare state structure (or what we still have of one) for a more laissez-faire structure. The American credit binge seems to be the biggest problem. Consumers taking advantage of lax lenders loan restrictions. People are living outside their means. The “free-market” isn’t going to solve for this. Tighter restrictions may be a possible solution.
You guys are too nice. Ignore the Paultard already.
“Maybe McCain just needs to learn more about the economy before he will figure out what to do about it.”
That’s the crux of the issue, as I see it. It seems that everybody (especially the media!) is hesitant to reveal his fraudulent or non-existent knowledge of the economy.
Treasury’s Plan Would Give Fed Wide New Power
http://www.nytimes.com/2008/03/29/business/29regulate.html?_r=2&hp=&oref=slogin&pagewanted=print&oref=slogin
it is very predictable.
I’ve never met a poor libertarian…
Actually, I have, but they were crazy Arkansas types. Nice, but crazy.
I think the overall problem with libertarianism is that it is, by definition, extreme. Pure or extreme forms of ideologies are rarely practical in the real world. Pure capitalism, pure communism, pure democracy, etc. are all very bad. I am sympathetic to a lot of aspects of libertarianism, particularly with civil liberties, but overall it is not an ideology that I can wholeheartedly buy into.
That being said, I think that in this case, the answer is abundantly clear. Even Adam Smith agreed that we do need governments to oversee some aspects of the economy because the free market will not fix everything itself. There is no built-in incentive for the market to prevent another clone of this housing crisis from happening in the future, so we need the government fo provide more oversight and regulation in the financial sector, particularly with high-risk real estate investments. I love Obama’s (and Hillary’s too, for that matter) solutions to the problem, but the McCain do-nothing approach doesn’t do it for me.
we can talk about what to do about the issues all day and differ in our prescriptions.
my real point and the most important is the diagnosis.
if we can’t agree on what is the source of a given issue, then any prescription to solve the issue will be insufficient.
And before one can even begin the process of diagnosis, we must agree on a set of moral principles of the ideal state, even if those ideals are vague. Our ideal state centers around some combination of freedom, equity, empowerment, education, justice, etc. These values sometimes come into conflict, so our political discussions often center around balancing these ideals in the real world.
It seems that Jesse has taken a single value, liberty, and placed it on a pedestal above all the others. Therefore any time she sees any sort of end problem, the process of diagnosis is biased to see some infringement of liberty as the root of the problem. Because some problems have at their root a lack of justice, an inequitable beginning societal distribution of resources, or ignorance, not all problems can be solved by reducing the size or impact of government. But I don’t expect one who worships only the god of liberty to recognize these lesser idols.
Also, your prescription for the problem (abolishing the IRS and the Fed and eliminating government regulations) is not something that our patient (the American political system) is willing to consider. The patient wants a second opinion, I think.
globalizati: That second paragraph was very good in identifying the problem with policy discussions between libertarians and everybody else. I’m glad that you’ve come storming back into the blogosphere like you have. You must have free time or something.
isn’t it interesting how this discussion lost its focus?
the issue still remains….
malinvestment.
for some reason ‘the source’ of all these loans continues to evade your analysis.
your resonses are implying that the misallocation of resources arrived naturally out of the market.
the point? the money that was lent was not a product of the investment banks but was encouraged by the federal reserves policy. it was artificial wealth. this is why so many risky invesments were made. not only are they encouraged by the idea that they will be bailed out, but the negative effect is blown out of proportion because artificial wealth is being created. The effects are compounded into more issues than just misallocation of resources, but inflation as well.
of course, what is happening now is not-so-much regulation of the fed, but regulation of other businesses. a large power grab.
as Paul says:
‘The fundamental question is whether a central bank can manage the supply of money and credit better than the free market otherwise would. We shouldn’t kid ourselves about the true nature of the Fed, which is inherently incompatible with real free market capitalism. Centralized planning of the money supply is a form of economic control that significantly affects prices, wages, and production levels. Remember how market economists once criticized central planning of prices, wages, and production levels in the former Soviet Union?’
You can analyze libertarians if you want, but you are ignoring the issue at hand. Why regulate business when it is the Fed that is creating the bubble?
All I can assume is that you continue to believe, without question, that the Fed is only reacting to the market. You would be sorely mistaken. And therefore any regulation you seek to impose on business will be largely inadequate.
This is like treating the symptom of cancer and not the disease itself.
If you support a central banking system, you would be forced to acknowledge that the major issue is what the Fed will do. The Fed will have more control over business. Currently you are getting what you want. And the government is getting what it wants. More regulation. Now the question will be: can you satisfactorily control the Fed when they are the dominant business? And in what way will they allocate resources? Qui bono?
Where is the competition?
Or do you think the state should have no competition?
I am posting these articles for your convenience. They are not long and are of public record.
What the Price of Gold Is Telling Us (the longest one)
http://www.house.gov/paul/congrec/congrec2006/cr042506.htm
Monetary Policy and the State of the Economy
http://www.house.gov/paul/congrec/congrec2008/cr022708h.htm
Let’s Legalize Competing Currencies
http://www.house.gov/paul/congrec/congrec2008/cr021308h.htm
Inflation- Alive and Well
http://www.house.gov/paul/tst/tst2004/tst030804.htm
I feel smarter now.
“the money that was lent was not a product of the investment banks but was encouraged by the federal reserves policy. it was artificial wealth.”
“This is like treating the symptom of cancer and not the disease itself.”
What your saying isn’t wrong, but what you overestimate is the power of the free-market to self-correct.
Let’s say it could. What elected politician would allow it to happen? What politician wants to be responsible for the fall from hegemony and years of economic depression? What would we do with the millions of people who go bankrupt?
People live on credit — that much is wholly obvious. Many people live beyond their means. Many businesses loan to people who’s credit scores are anything but good. All of this results in a loss of overall liquidity.
‘the source’ of all these loans’
The Federal Reserve sets the monetary policy and federal interest rate. I think we’re all well aware. Bad policy has lead to high-risk, high-return investment, sub-prime loans, and economic frivolity.
Ok, let’s blame the Fed, I’ve got no quibble with that. However, dissolving the Fed. is far from fixing the problem. I think you are hinting at a complete restructuring of the United States economic structure — to something more free-market.
How will people pay for homes, school, cars, businesses, etc. if they can’t borrow money?
In the end this is about loans and loan policy — the source of the economic malaise.
I hereby challenge Denney to abstain from the use of the word “hegemony” in public discourse for a period of three (3) days.
Kind Sir,
You challenge is hereby accepted. In all honesty and truthfulness, I, Denney, will abstain from using the word “hegemony” in public discourse for the said period of three (3) days (Sunday, Monday, and Tuesday).
The set challenge has now commenced. May God have mercy upon my soul.
Does he really use the h-word all that much? I never noticed…
As soon as I read that, I was extremely tempted to post something about the future of America’s H*******, but I didn’t.
“but what you overestimate is the power of the free-market to self-correct.”
lol. actually i’m not, that’s why i want more free market. i might say that you underestimate the extent to which the intervention by the fed hinders the free market.
as Gary North points out:
“The modern economy is addicted to government debt by way of central banking debt. The system is self-reinforcing. Governments spend more money and make more unfunded promises than taxes can fund. So, governments turn to debt as a way to make up the shortfall. To keep interest rates low, governments license privately owned central banks to create money in order to buy government debt. This has been the pattern ever since the creation of the Bank of England in 1694.
“I think you are hinting at a complete restructuring of the United States economic structure — to something more free-market.”
the fed was created in 1913. keep in mind that the legislation, the federal reserve act, was sold to the public as a way to break the money trust and as a lender of last resort. (even though its not federal, nor does it have any true reserves) the irony, or twist, is that it was the money trust that designed the policy. qui bono?
remember hearing about the booming 20′s? and then the huge bust or great depression?
why not return to a sound money, or commodity money market?
the whole point of “gold” or any commodity money system is because it generally forces people to live within their means. it is a product. it cannot be created out of thin air like paper and digital iou’s. (will you accept the money i printed last night?)
“How will people pay for homes, school, cars, businesses, etc. if they can’t borrow money?”
the most important question in regards to debt is:
“what kind of debt, owed to whom and when.”
no one is claiming you can’t lend or borrow. that is an individual choice and contractual agreement.
so yes. “In the end this is about loans and loan policy ”
this is true for the most part…..
we haven’t discussed the IMF/World Bank, trade deficits, foreign policy, economic hitmen, unbalanced budgets, the nations debt that continues to rise. this is very much in the sphere of this discussion if one is willing to go there. money pervades all area’s of life. every transaction in the world. currency is the most traded thing in the world i think.
If the American people were taxed each year on the actual cost of war, bureaucracy, etc. they would never be able to pay it, let alone agree to such a demand. this is why the system of the hidden tax (inflation) is accepted. it is very sinister and expedient. the temptation to print money, protected by law, and hence is a monopoly on couterfeiting, is too great for most politicians, bankers, and ultimately the public to let go of. it is an addiction.
but the sooner we ween ourselves from this system the better.
so while you may advocate saving people now, at the expense of more inflation and taxes, ultimately the bills will come due.
http://mises.org/multimedia/mp3/audiobooks/GoldPeaceProsperity.mp3
but back to obama for a moment…..lol
besides the fact that he will spend billions more on top of the national debt
at least there is some diplomacy to be had with regards to iraq
The Smart Way Out of a Foolish War
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/27/AR2008032702405_pf.html
mccain doesn’t have a chance.
mccain doesn’t have a chance.
I think this is something we agree on, although I am always nervous about the Democratic Party’s ability to shoot itself in the foot, even when a victory seems inevitable.
At least we can agree on something. lol.
just a couple more quotes and im done.
food for thought:
Alan Greenspan:
http://www.usagold.com/gildedopinion/greenspan.html
A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled.
Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) [And of course, this is why Bernanke is going to spend us out of trouble instead of raising interest rates]
It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.
But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists — why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely — it was claimed — there need never be any slumps in business. And so the Federal Reserve System was organized in 1913.
It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government.
Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks (“paper reserves”) could serve as legal tender to pay depositors.
…….This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.
Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)
3rd president of US (1743 – 1826)
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Fractional Reserve Banking
http://www.lewrockwell.com/rothbard/frb.html
“The same is even true of the great “investment banking” houses, which developed as industrial capitalism flowered in the nineteenth century. Investment bankers would take their own capital, or capital invested or loaned by others, to underwrite corporations gathering capital by selling securities to stockholders and creditors. The problem with the investment bankers is that one of their major fields of investment was the underwriting of government bonds, which plunged them hip-deep into politics, giving them a powerful incentive for pressuring and manipulating governments, so that taxes would be levied to pay off their and their clients’ government bonds. Hence, the powerful and baleful political influence of investment bankers in the nineteenth and twentieth centuries: in particular, the Rothschilds in Western Europe, and Jay Cooke and the House of Morgan in the United States.
By the late nineteenth century, the Morgans took the lead in trying to pressure the U.S. government to cartelize industries they were interested in – first railroads and then manufacturing: to protect these industries from the winds of free competition, and to use the power of government to enable these industries to restrict production and raise prices. “
Just a few quick questions. Why doesn’t Sen. Obama (a member of Congress who’s job it is to create policies, yet he advocates those policies only as a presidential platform…but wait he still would need Congress to pass them) push through these amazing reforms and policies since we are in an “economic crisis?” It couldn’t be because he would not have the support, because you have said that it is extremely popular and that the people want the government to take action, right? If you are correct, then it shouldn’t be hard for the people to influence their senators and representatives to vote for these reforms, right? It seems like this is just another example of a presidential candidate (especially a current member of Congress) running on a presidential platform that really revolves around issues that Congress handles, not the President. The President can propose legislation, but it is the job of a member of Congress to do this. I just wanted to point all of this out and get some feedback since it seems that no one has pointed out this recurring political maneuver made by presidential candidates of all parties.
Well first of all, I did point out in the post that Obama is already sponsoring and proposing legislation to deal with the immediate crisis. That includes the new FHA program, the $10 billion foreclosure prevention fund, the increased fraudulent lender penalties, the scoring system, and the 10% mortgage tax credit.
As for the rest of the major reforms, there is really no purpose in attempting to pass them now. President Bush is not (repeat NOT) going to give the Obama administration a head start by implementing the Senator’s economic policies while Bush still has a year left. There is no chance of the broad reforms happening until we have a new president.
As for Obama’s popularity… yeah, sure he’s popular. But to pass major legislation over a veto would require 67 Senators and 290 Representatives. Even Obama doesn’t have that kind of clout right now as a junior Senator and presidential candidate.
I think you downplay the role of the president in legislation. The president doesn’t just sit off on the sidelines and quietly whisper ideas. Presidents are actively involved in the legislature and they use the bully pulpit and the rest of their political capital to push through their legislation, especially right after an election if the election gives the new president a mandate.
“There is no chance of the broad reforms happening until we have a new president”
It is already happening. Obama will continue to let the same ball roll.
Obama is not changing any policies. Only shifting numbers around. (And add plenty of digits a well)
2008 Presidential Candidate Spending Analyses
http://www.ntu.org/main/page.php?PageID=141
The Fed’s role is already being redefined. It is taking on a huge role in the financial world (Besides, this is global. Central banks are international). Basically a whole restructuring. Obama will not challenge this. In fact, I think, it’s sets him up perfectly to carry on the progressive era’s agenda of collaboration between big business and government(s).
Regulation costs money. We can be sure there will be more tariffs, regulation of energy, etc.
All I am saying is be prepared. There is not much the people can do at this point beyond just riding it out. The federal “officials” are making that pretty clear
It’s all about savings. Savings are capital. And it is at an all time low.
Credit Expansion, Economic Inequality, and Stagnant Wages
http://www.mises.org/story/2847
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Great.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/31/cnfed131.xml
(sort of off topic, why would the Democrats want to get rid of the GAO?)
GAO Blasts Weapons Budge
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/31/AR2008033102789.html?hpid=topnews
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Michael Rozeff writes (Mar 11, 2008):
“What the Fed is doing with its Term Auction Facility (TAF) is not at all the standard injection of reserves that balloons the money supply. To understand the effects, we need to look at the TAF closely. The following is a first stab at seeing what is going on. We do not know all of what will happen. But we have enough to get an outline.
The banks get a loan of U.S. Treasury bonds from the Fed, a renewable 28-day loan. The Fed becomes a creditor of the bank by making this loan.
The Fed charges the banks a preferentially low interest rate on this loan.
The bank gives the Fed some securities as collateral on the loan, and the Fed gives the U.S. Treasuries in return. The banks sends the Fed debts it owns that are far more risky and far more toxic than Treasuries, such as mortgage-backed securities. Some of it is bad paper, probably a very great deal of it. Its credit rating is misleading, because the credit agencies have failed to downgrade lots of shaky credits.
Some large banks are probably the main beneficiaries. Their asset quality improves while the Fed’s asset quality diminishes. The bank’s financing (its sources of funds, its own liabilities and equity on the right-hand side of its balance sheet) has now changed. The Fed has become a major creditor of the bank.
The Fed has thus partially nationalized these banks. By injecting $200 billion, it has become a major virtual “owner” of the banks. $200 billion is a significant number compared to the net worth (equity) of the banking system, and that number may grow.
The risk borne by the remaining creditors of the banks is reduced, at least temporarily. It is shifted to the Fed. The banks will probably renew these term loans for quite a long time, while the mortgage payments are made. The bank’s equity holders and lenders therefore gain as the assets of the banks improve in quality.
Should these mortgage payments fall short of what the Fed would otherwise have made on the U.S. Treasuries, and that is to be expected, there will be less money to turn over to the U.S. Treasury. (The Fed turns most of its earnings back to the Treasury.) That means that the U.S. taxpayer will end up footing the bill for the bad loans made by the banks.
The Fed is robbing the taxpayer as well as nationalizing the banks covertly.
That is how I see this financial manipulation at this time.”
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They Just Don’t Get it
http://www.financialsense.com/fsu/editorials/schiff/2008/0307.html
U.S. Bubble Economy Part 1
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I can’t stop Posting!… it’s too much fun!
(But I hope you get something out of it)
I think we have probably reached a funamental empasse in our macro economics discussion. I (and most other economists) do not agree with you (or your Mises’) theories about the Fed causing all of the problems in our economy. I like governmental regulation because I do not trust people to do what is best, I do not trust corporations to do what is right, and I do not trust the market to fix all major problems. I think that is why we invented governments in the first place, to make people do what is necessary for society, even if they would prefer not to.
It is fine if you want to continue to blame the Fed for our economic problems if you want to. Perhaps they are to blame for some of them, and certainly they have not done everything in the best way now that we look back in retrospect. But I still think that overall the Fed is a positive, stabilizing force for the American economy.
(One last side note – the Democrats do not want to abolish the GAO. Nobody I have heard of wants to do that.)
Although we obviously disagree very fundamentally on this issue, I thought of you when I posted the newest blog post about legalizing marijuana – that seems right up your libertarian alley and I thought maybe we would agree there.
there’s a difference between theory and fact.
inflation is an increase in the money supply.
“why we invented governments in the first place,”
and this is where we are divided.
it makes sense to me that the only legitimate reason for any government is to protect individual rights. not to control society. rights without a concept of property is arbitrary. that’s basically the platfrom of ron paul. private property and contract.
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and yes, i do think the war on drugs is pointless and counterproductive. a perfect exmple of free markets & black markets.
no matter what law is imposed a free market will always mold to it.
it’s also another example of how the executive branch siezes control that is beyond its contitutional bounds.
http://www.sourcewatch.org/index.php?title=State_of_national_emergency
“I think of all the damnable heresies that have ever been suggested in connection with the Constitution, the doctrine of emergency is the worst. it means that when Congress declares an emergency, there is no Constitution. This means its death. It is the very doctrine that the German chancellor is invoking today in the dying hours of the parliamentary body of the German republic, namely, that because of an emergency, it should grant to the German chancellor absolute power to pass any law, even though the law contradicts the Constitution of the German republic. Chancellor Hitler is at least frank about it. We pay the Constitution lipservice, but the result is the same.”
“But the Constitution of the United States, as a restraining influence in keeping the federal government within the carefully prescribed channels of power, is moribund, if not dead. We are witnessing its death-agonies, for when this bill becomes a law, if unhappily it becomes a law, there is no longer any workable Constitution to keep the Congress within the limits of its Constitutional powers.”
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(One last side note – the Democrats do not want to abolish the GAO. Nobody I have heard of wants to do that.)
You’re right, thanx for clarifying. Got my articles switched around
“I (and most other economists) do not agree with you (or your Mises’) theories about the Fed causing all of the problems in our economy. ”
Just to defend myself here…
I was not claiming ‘all’ problems. My point has been rather specific. It just covers a lot of territory because the economy is such a massive phenomenon. Afterall, the economy is just the way in which every single human being on earth interacts with one another.